Calculus Entrepreneurship And Big Ideas

One thing I have noticed a lot is tge lack of truly original ideas from entrepreneurs that I meet with

It is more than just taking the Uber business plan and applying it to another vertical  (That works until Uber decides to enter that vertical!)

It is that they are doing Calculus Entrepreneurship   What I mean by that is they see an equation and they try and form a business off the exact derivative of it

Sometimes it works   There are ice cream stores, frozen yogurt stores and shaved ice stores  But its rare since there are niches for each of them

Fred Wilson calls these kinds of businesses ankle biters

Part of me thinks my friend Bob Geras is correct  He said told me to be aware of the phenomena of entrepreneurs forming businesses in order to draw a paycheck  They really don’t have the intent to build a blow out business  Some do it because they don’t want to take a corporate job

The entrepreneurs are excellent salespeople and good enough at execution so they find just enough investment

I suppose that’s why when you see a truly groundbreaking idea you get so excited by it

Recently I was with a small group of forward thinking people in Texas We thought about the next big ideas   Where are they going to come from?

Bitcoin and Artificial intelligence are too easy   They are big ideas happening now  One place I think there will be big fundable ideas is in places where a high degree of internal DNA about a business are needed to design solutions to big problems

There are plenty off business silos that are ripe for disruption  No need to be a copycat or a derivative of an existing business

I typed this post out on our drive back from Texas  My wife is taking her turn driving

Interviews on TV

Sometimes stuff happens. As we were getting ready for The Santelli Exchange the interview was killed.

TV can be so fickle

Cynicism

It pays to be cynical about our government.  I think that liberals used to be generally more cynical about government and corporations than conservatives.  But today, I see the opposite being true-with government.

To give you some background.  The New York City big banks hate the Chicago exchanges.  The CBOE started back in 1973, and NYC couldn’t figure out how to steal the business and bring it back to NYC where they thought it belonged.  What did they do?  They set up competing exchages.  They failed.  So, they set up a revolving door between Wall Street and Washington DC.  The put their people in the SEC.  The rewrote the rules.  Now option trading is done everywhere in a fragmented marketplace.  NYC banks rip off their customers in dark pools and arbitrage any left over risk off on the CBOE.

This is how they operate in all OTC markets.

The futures market is a lot different than the equity market.  First, different regulator (CFTC).  Second, because futures had such a nefarious past with market corners etc, it has a far different structure and regulations. In 1972, when financial futures were first traded in Chicago-it was critical for the markets to have a good regulatory structure that gave them validity.  So, they didn’t have fungibility.  They didn’t have all the crazy practices off exchange that are allowed in the SEC world.  The retail customer got the same shot the big institution did.  The bid/ask spread was pure.  Markets were not fragmented.  Exchanges competed like hell for business.  The winner got the entire market.

Big institutions hate this.  They can’t play their games.  So, they are slowly trying to turn the CFTC into the SEC.  They are using the Department of Justice.  They are trying to buy congressman and Senators via lobbying cash.  Ironically, Obama is deaf to the Chicago exchanges, and is in the back pocket of the NY banks.  They tell him to jump, and he asks “How High?”.  Bush was not much better by the way.

In 2008, the DOJ released a letter that caused the CME to lose 140 bucks in value overnight.  That person then took the CEO job of Wachovia.  Hmmmmm.

Yesterday, the head of the CFTC Gary Gensler-former Goldman employee, ruled against the CME in a fungibility case versus the ELX.  ELX is a new rival exchange put up by the banks.  It is purely there to try and get fungibility.  It has nothing to do with fees.  Banks want to hide their volume and rip off their customers in dark pools of futures, just like they do in SEC regulated equities and options.

I hate to go Glen Beck on all this and connect dots to conspiracy theories-but if the shoe fits.

It is interesting that Gensler was the appointee.  Previous appointees have not been big NYC bankers.  They have been bureaucrats (Brooksley Born), industry people not from NY Banks (James Newsome)  Gensler came in with an agenda.  He is implenting it.

So, what’s the harm?  The harm is a fragmented marketplace.  The government gets a cheaper price for it’s debt when there is a deep liquid market.  Fragmentation will force the government to pay a slightly higher price to auction its debt.  This costs taxpayers more money.

Secondly, businesses are hurt.  Bank loans are figured off govt rates.  Higher govt. rates mean higher costs of capital for business.  This raises prices and hurts GDP.

Third, Pension  and mutual funds will have to deal with a wider bid ask spread to enter and exit markets. They will pass this cost on to their investors.

Fourth, Hedge funds that are not part of the cartel will be at a disadvantage. The market will be less efficient and competitive.

Fragmented markets help no one.  They raise costs.  If CME were to lose the market fair and square, fine.  Or, if two competing exchanges battled for a market, and one exchange bested the other (as in the case of CME vs LIFFE back in the 1980’s for Eurodollars, or CME vs CBOT for Gold in the 1970’s) then that is great too.

But to totally slant the competition, to direct a winner and loser as Gensler has done is pitiful.  It’s crony capitalism at its finest.  America was not founded on crony capitalism.  But it’s the kind of capitalism that agents of the government(regardless of party affiliation) play best.

UPDATE:  Brooksley Born was not a career bureaucrat.  She was an attorneyBrooksley Born – Wikipedia, the free encyclopedia.  Attorneys just seem like Bureaucrats to me!

The President and Bernanke

Reconfirmation hearings for the Federal Reserve chairman are ongoing.  It is not surprising that Bernanke is getting tough questioning given the financial conundrum we have seen during his tenure.  However, since Obama has taken office, there has been little that they have said to give anyone confidence that they want him in the position.

Last January, in an interview on CNBC, the anchor asked Christine Roemer about Gentle Ben.  She was silent.   It was telling.

My gut tells me that they are paving the way for either Roemer or Larry Summers to get the spot as Fed Chair.  I think this would be a catastrophic mistake. The Federal Reserve needs to be independent.  It needs oversight, but the Fed Chair needs to be able to tell the President and Congress to take a hike. Summers would not be that type of Fed chair.  He is smart, but has only worked with Democrats.  Roemer is similar.  When they were away from Washington they went into Democratic cocoons at Berkeley(Roemer) and Harvard (Summers).  Obama and his people want to Alinsky-ize every segment of government and oversight.

While I don’t agree with everything Bernanke has done, I think it is best at this juncture to re-appoint him.

Limoncello

Have you ever had a nice shot of limoncello after dinner? Wonderful stuff if made correctly. First time I had limoncello I was in Tuscany. We had driven up there after touring Rome, still a little out of sorts. I wasn’t good at navigating the Italian roads, so a 3 hour trip took a lot longer!

We were in this local restaurant which had a similar feel to a gymnasium. There were 20-30 little kids in their for a birthday party and they were screaming. My family and I ate dinner, and then the server came up to us and asked. “The table next to you wants to buy you a shot of limoncello, would you like some?” Very nice of the Italians dining next to us. I think they were the parents and saw the weary look on our faces. “Of course, I said.” She brought us a shot of this frozen lemony stuff. It was so good, but had a little fire as it went down.

I tried some store bought stuff when I got back to the States, but it tasted like lemon cough syrup and more like medicine than the wonderful digestif I had in Tuscany. However, due to the power of the internet, you are able to find things. I now make my own Limoncello and it is wonderful. You can make it too. Really simple.

First, get a big wide mouthed jar. You’ll need 1 bottle of grain alcohol, and 10-13 lemons. Wash the wax off the lemons and carefully peel them with a vegetable peeler. You only want the zest-no pith. Put the peels into the jar. Pour the grain alcohol into the jar, seal it up and wait 30-40 days. The oil from the peel seeps into the liquid. After your penance of waiting, make a simple sugar syrup. Around a cup and a half of sugar, and a cup and a half of water. Maybe just a bit more sugar/water if you want it a little sweeter. Heat it up, let it cool and dump it in. Let it sit for another 10 days to 14 days. Strain off the lemon peels and bottle it. You have limoncello. Throw it in your freezer. It’s a lot better cold, and will never freeze!

Donuts

There is a place in Northern Minnesota. It is in Grand Marais. My grandfather introduced me to it as a high schooler and I have been going there ever since. World’s Best Donuts.World’s Best Donuts, Grand Marais, MN. You will not find a better donut anywhere on the planet. I don’t even eat donuts the entire year, until I go up there. They are extremely crisp on the outside, tender and flaky on the inside. A dozen costs something like 5 bucks. If you ever go there, prepare to wait in line.

In Chicago, I have not found a donut shop that is even close. I quit looking years ago. Dunkin’ Donuts are horrible. Lou Mitchell’s has some nice pastries, but both those and their donuts are super expensive.

The other thing I have noticed about Donut shops is their coffee always tastes like crap. What gives? Can’t they make a decent pot of coffee? It’s always watery and tasteless. Krispy Kreme has some of the worst coffee in the world. I also am not a fan of Dunkin Donuts coffee. McDonald’s now has better coffee than DD.

With all this crap that has come out about cholesterol in the last 30 years, I think that donuts have really gone downhill. Everyone cooks them in weird oils trying to make them healthy for you. Yes, eating dough fried in this monounsaturated oil is going to keep you out of the chest cutter’s operating room. Ha! The best way to cook them is to just use lard from a pig. Leaf Lard. Open Kettle Leaf Lard-Ready to Use! 2 or 4 lb The stuff is really expensive! But it’s worth it when you are talkin’ donuts.

In case I am not there when my wife passes away, she has made a request. On her death bed, she wants a dozen from World’s Best. Sugar and Cinnamon please, with maybe one Plain thrown in the bag. She will eat the entire dozen and then head down the path to heaven.

OMG I agree with Obama

Obama went into the White House with a lot of promise.  Running as a centrist when his entire career was spent on the far left wing, he rode a financial crisis into the office of President.  His opponent, John McCain had made the mistake of stating early in his campaign, “I don’t know a lot about economics.” .  Luckily for Obama, he had never made the same statement. However, after a year in office it is safe to conclude that Obama knows very little about economics, finance, or running a simple business.

The current solution to the economic malaise is to keep interest rates low, print money and engage in Keynesian stimulus.  Bernancke has had a hand in the policy, but on the fiscal side it’s the President’s baby.  We also have used government money to prop up failing manufacturing firms in the case of autos, and prop up failed banks in the case of Wall Street.  Now that Obama and his team have lost their third election in a row, they are switching their rhetoric and talking big about jobs.  Currently, unemployment sits at just over 10%, much higher than the promised target with the stimulus package the Democrats and Obama advocated for.  We are hearing talk of stimulus redux.  Economists Paul Krugman and Brad DeLong have written that it’s not big enough!

It has been proven many times that the economic multiplier effect of government spending is equal to 0.  That’s right zero, nada. Gary Becker and Kevin Murphy from the University of Chicago have written extensively on it.  Luis Zingales, John Cochrane and others have written extensively on the crisis.  Even Christine Roemer, a salt water economist, published a paper saying as much.  Yet they push on.

First off, let me say I disagree with the GM bailout, the bank bailout, and the stimulus.  I was also against the TALF, TARP and al the other shenanigans that Treasury Secretary Paulson played under Bush. It would have been painful in the short term to have these companies fail, but far better for American capitalism if they did fail.  From burnt fields grow new shoots.  Some in Congress had the intestinal fortitude to cast a very difficult vote against all these failed economic policies.

Now that the President is refocused, my guess is “jobs” will mean union and government jobs.  It’s too narrow a focus, and too small a group.  Plus, unions and governments are not as productive as regular Joe’s.  Just compare GM and their output versus any foreign car company that has built a plant on American soil.

Instead of a narrow focus, Obama ought to take a page from a different playbook.  Milton Friedman famously said, If you want more of something, make it cheaper.  Less of something, tax it. Make is cheap to employ people.  In a broad context, lower the costs to employ someone.  Lower the payroll tax, end health insurance regulations, and other employment regulations.  Lower the minimum wage.  Raising the minimum wage adversely effects women, minorities and inner city teens. Lower capital gains taxes-as a matter of fact, cut them to zero.  Taxing capital is a tax on production.  Lower corporate taxes to a flat tax of 15%.  Instead of having the highest taxes in the world, the US should have the lowest.  It will encourage companies to re-patriate here and hire American workers.  Lower the income tax rate from a progressive rate to a flat tax of 15-20%-no deductions for anything. It will make tax filing easier, make the opportunity cost of NOT filing taxes high, and really stimulate growth.

Economic research has proven beyond a shadow of a doubt that there is a large economic multiplier effect for every percentage point you drop tax rates.

The last thing they should do is end taxes on dividends.  Why?  Lots of cash now sits on US company balance sheets.  One reason is executives say that their shareholders don’t want to pay a tax on dividends.  End the tax.  This will compel companies to make a decision, invest or release cash to investors.  Many will release cash to investors and it will be re-invested in other things.  That is a better way to stimulate the economy-rather than a listless, monolithic, wasteful government picking winners and losers.

No one in Washington has the balls to implement tax cuts and cut the government influence on American business.

Obama: Year 2

Obama went into the White House with a lot of promise.  Running as a centrist when his entire career was spent on the far left wing, he rode a financial crisis into the office of President.  His opponent, John McCain had made the mistake of stating early in his campaign, “I don’t know a lot about economics.” .  Luckily for Obama, he had never made the same statement. However, after a year in office it is safe to conclude that Obama knows very little about economics, finance, or running a simple business.

The current solution to the economic malaise is to keep interest rates low, print money and engage in Keynesian stimulus.  Bernancke has had a hand in the policy, but on the fiscal side it’s the President’s baby.  We also have used government money to prop up failing manufacturing firms in the case of autos, and prop up failed banks in the case of Wall Street.  Now that Obama and his team have lost their third election in a row, they are switching their rhetoric and talking big about jobs.  Currently, unemployment sits at just over 10%, much higher than the promised target with the stimulus package the Democrats and Obama advocated for.  We are hearing talk of stimulus redux.  Economists Paul Krugman and Brad DeLong have written that it’s not big enough!

It has been proven many times that the economic multiplier effect of government spending is equal to 0.  That’s right zero, nada. Gary Becker and Kevin Murphy from the University of Chicago have written extensively on it.  Luis Zingales, John Cochrane and others have written extensively on the crisis.  Even Christine Roemer, a salt water economist, published a paper saying as much.  Yet they push on.

First off, let me say I disagree with the GM bailout, the bank bailout, and the stimulus.  I was also against the TALF, TARP and al the other shenanigans that Treasury Secretary Paulson played under Bush. It would have been painful in the short term to have these companies fail, but far better for American capitalism if they did fail.  From burnt fields grow new shoots.  Some in Congress had the intestinal fortitude to cast a very difficult vote against all these failed economic policies.

Now that the President is refocused, my guess is “jobs” will mean union and government jobs.  It’s too narrow a focus, and too small a group.  Plus, unions and governments are not as productive as regular Joe’s.  Just compare GM and their output versus any foreign car company that has built a plant on American soil.

Instead of a narrow focus, Obama ought to take a page from a different playbook.  Milton Friedman famously said, If you want more of something, make it cheaper.  Less of something, tax it. Make is cheap to employ people.  In a broad context, lower the costs to employ someone.  Lower the payroll tax, end health insurance regulations, and other employment regulations.  Lower the minimum wage.  Raising the minimum wage adversely effects women, minorities and inner city teens. Lower capital gains taxes-as a matter of fact, cut them to zero.  Taxing capital is a tax on production.  Lower corporate taxes to a flat tax of 15%.  Instead of having the highest taxes in the world, the US should have the lowest.  It will encourage companies to re-patriate here and hire American workers.  Lower the income tax rate from a progressive rate to a flat tax of 15-20%-no deductions for anything. It will make tax filing easier, make the opportunity cost of NOT filing taxes high, and really stimulate growth.

Economic research has proven beyond a shadow of a doubt that there is a large economic multiplier effect for every percentage point you drop tax rates.

The last thing they should do is end taxes on dividends.  Why?  Lots of cash now sits on US company balance sheets.  One reason is executives say that their shareholders don’t want to pay a tax on dividends.  End the tax.  This will compel companies to make a decision, invest or release cash to investors.  Many will release cash to investors and it will be re-invested in other things.  That is a better way to stimulate the economy-rather than a listless, monolithic, wasteful government picking winners and losers.

No one in Washington has the balls to implement tax cuts and cut the government influence on American business.

Red Meat-definitive guide to Chicago Steak

There are serious issues in Economics, Finance, and Politics that we can cover.  But there are bigger issues out there.  A friend telephoned me today because a client of his was visiting Chicago for the first time.  Where should he take him for steak?  If you are not from Chicago, this can be a very incendiary question.  Fights have broken out over loyalty to beef.  Rightfully so.  Some places that call themselves steak places in Chicago stink.  Like Rodney Dangerfield said in Caddyshack, “This is low grade dog food.”  So here is my take on steak in Chicago (suburbs not included).

There is not a “best” solidly number one steakhouse in Chicago.  Then there are places like Harry Carey’s that serve a great steak, but aren’t really classic steakhouses.  If you have dietary restriction, the only kosher steakhouse I know of is Bugsy’s Charhouse in the northern suburbs.  Never been there so I can’t rate it.  I also am not counting the South American places.  They have meat, but it’s not the classic Chicago experience.  I do think about taking a bunch of teen age boys to one and just watching them eat with the green chip up.  Bones would fly.  Would be really cro-magnon.  But we can rate the other places.

Here are the tourist traps.  Conventioneers that are afraid of cabs and going “into the neighborhoods” go to these places.  You stay away, capice? Sullivan’s, Shula’s(stick to football), The Palm, Wildfire (chain), Capital Grille (but the one in DC is great.  Get a waiter named Tony-he is the best), Kinzie Chop House, Weber Grille(I can do that at home), Rosebud Steakhouse (shoulda stuck to pasta), and Ruth’s Chris.  Ruth’s Chris doesn’t even use prime beef, they use grocery store choice! Lastly, there is Ditka’s.  The Coach’s place is okay-but way too touristy for me.  I hesitate to tick off da coach, but I like the bar, good for groups, but just for a dinner out I’d go somewhere else.  I am going to wear a helmet when I go by there from now on.

Here are some really good places that you can get a great steak, but it’s not the feature.  Keefer’s, the aforementioned Harry Carey’s, Joe’s Stone Crab.  I am biased on Harry Carey, since they serve http://www.tallgrassbeef.com.  It’s great beef, and it’s good for you!  I order it online.  High in Omega 3’s. Full disclosure, I liked it so much I invested in the company.  That sounds like Victor Kiam, the Remington guy, but I haven’t gotten rich off it yet.  Another of my personal favorites is Italian Village at lunch.  I hate to even tell you this.  Go upstairs into the bar and see Vinnie.  Italian Village does a great steak at lunch, and it is worth it to be served by Vinnie.  There might not be a better bartender in Chicago.  They have tremendous ham on Friday too.

Another segment of the market in Chicago is “chick friendly” steakhouses.  Tasteful decorating, better focus on side dishes-good place to take a woman and then get laid later on.  With what you’ll pay at these places you should get a little something for the effort.   David Burke’s Primehouse is the best of these kinds of steak spots.  He dry ages his own angus beef (not USDA prime).  The side dishes are the best at a steak house in the city.  The Caesar salad is tremendous.  Service is great.  Used to be a guy there named Jeff Hemmings that was on the trading floor for 15 years or so.  Jeff passed away this year.  I’d go there just to honor him.  He whipped the people in shape at Prime because he knew what people wanted.  N9NE is an overpriced place compared to David Burke’s place.  If you have to go with women that are adamant about not going to a steak house, take them to Primehouse.

Let’s cut to the meat of the matter. Enough with trying to please the broads.   You can’t be a steakhouse in Chicago unless you use USDA Prime Beef.  Prime beef is expensive.  There is so little of it we don’t even trade it on the floor.  Due to the economic decline, you can get prime beef at Costco now.  It’s tasty stuff, even though it’s absolutely horrible for you (that’s why I chow on tallgrassbeef.com).

Smith and Wollensky has a spot on the Chicago River across from Trump Tower.  If I wanted to do that, I’d go to NYC.  I am not a fan of the place.  Meat is decent.  They do a really good job with wine.  But I just feel a little uncomfortable in there. Can’t put my finger on it.  The side dishes are not that spectacular either.

The Chicago Chop House, or more properly, Chop House, is pretty decent.  I once took a person from India who was Hindu there for his first ever cut of beef.  He ordered a bone in filet medium.  I tolerated his “medium” order only because he was a steak virgin.  After all, we truly were goring a sacred cow. Chop House is also where I took a pretty high powered family one night.  We had a fantastic time, and the service was great.  Plus, they have a really great wine list.  You cannot go wrong here, and lot’s of people in Chicago will swear it’s their favorite. But it’s not mine.  The room is a little too cramped for me.   I am 6’5″, 245 lbs. It doesn’t take much to get me cramped.

Gene and Georgetti’s may serve the best T-bone in Chicago.  My wife and I split one there.  They have a great old fashioned bar.  Lots of red.  I don’t particularly care for the room.  It’s loud as hell.  But the steaks there are tremendous.  Toss up between here and Chop House, and if you are in a more gregarious mood, G+G is the spot-they have a better bar and better bartenders.  Mean martini’s.  It is also considered the power steak house in Chicago.  They negotiated the CME-CBOT deal here.   My best G+G story:  I was a rookie sales guy working for 3M in 1984.  I was working a show at McCormick Place with a bunch of big shots from the home office in St. Paul, MN.  A guy named Charlie McGreevy asked me, “Where should we go eat steak in Chicago?”.  Not ever having been at a steak house, I kept my mouth shut.  Charlie said, “How about Gene and Georgetti’s?” I shrugged my shoulders and went back to work.  That night, the waiter came to take our order.  I looked at the menu, didn’t want to spend a lot of dough on the company-and I thought it was more of an Italian place.  I ordered the pasta.  Doh!  I think I drooled all over my suit.  Charley was a great guy with a street smart New Jersey attitude-so he didn’t ride me too bad.

Erie Cafe is a Chicagoans place.  Nothing fancy.  Plenty of room at the tables.  Nice outdoor seating in the summer.  Decent sides, not great, but decent. Nice big bar, with okay bartenders. What I like about it is that there is no bullshit, no niceties.  It’s real matter of fact Chicago.  Go with your girl, wife, buddies, business.  Nothing over the top except the beef.  The beef is excellent. We are there to gnaw on a t-bone and they are there to serve us.  This steak house is like a diesel engine.  Really reliable and comfortable.  You don’t see a lot of movie stars here.  The wine list is solid.  The owners are related to the original owners of Gene and Georgetti’s.  I go here a fair amount of the time. They take care of their regulars.

Morton’s is now a world wide chain.  If you go to the Chicago original on State St. next to the Viagra Triangle it’s really good.  I know of two or three people that say this is the best steakhouse in Chicago hands down.  They aren’t skinny.  Morton’s may have the best total food of any steakhouse.  The side dishes add to the steak.  Potatoes as big as footballs.  One night I was there with a bunch of traders and saw a guy put down a 48oz porterhouse.  It was amazing.  I ate a 24oz porterhouse that night.  Thank goodness we were young.  Otherwise we would have needed a side of Lipitor.  Morton’s in other cities might not be as good.  The Morton’s in the Loop isn’t as good.  But the Morton’s on State St. is really true steakness.  Plus you can stumble out of there and not have to walk real far to a lot of bars.

Gibson’s is flash and dash.  It shares a kitchen with Hugo’s Frog Bar-so at Hugo’s you can get a Gibson’s steak.  Gibson’s has a decent wine list.  The meat is prime and the chefs know how to cook it.  They make a mean steak.  Bone in Rib eye, medium rare.  Yum.  I might go there after writing this blog.  Movie stars hang at Gibson’s.  Johnnie Depp gave a $4000 tip there.  Hope the waiter doesn’t get used to that!  Famous beautiful people munch here.  Michael Jordan used to smoke cigars in the corner window with his posse and sirloin.  It is the Viagra Triangle.  In the summer, you can sit outside and pretend you are in France.  It’s actually really refreshing.  That said, everything here is over the top.  This is the see and be seen steak house in Chicago.  Downside, you have to go upstairs to go to the bathroom.

Oh, and never go to a good steak house and order it medium, medium well, or well done(there is a special place in hell for people that order prime beef well done-just eat the chicken or fish please.)  So there you have it.  Hungry?

Flooredthemovie.com

Tonight I saw a documentary called, “Floored”. It is about life in the trading pits of Chicago. But, actually, it’s about much more than that. I am far too close to the topics discussed in the movie to act like Roger Ebert and give the movie a thumbs up or down. If you get a chance to see it or buy the DVD, I certainly enjoyed it. Seeing it though made me realize what a special place the trading floor was. It is a myopic lens to view the world through, but wow, what a view.

When you talk to someone in the business, find out if they were a broker, a desk broker, or a local. Each has a different function in the marketplace. The local is the one that assumes most of the risk. That’s the guy that knows what real heat feels like. As the movie says, no steady paycheck, no 401(k), no health benefits, no net. One day you are shopping for a Cartier watch, the next day you are buying your sheets and towels at Walmart. If you really want to know the business, talk to a local.

If you talk to successful traders they will tell you that there is not a more fun way to make a living. Trading your own money. To put it into words that you might be able to understand, Joe Gibbons in Floored says, “I am trading my own hedge fund, with only my own money. My customers are my kids, my wife.” They have implicit trust that Dad isn’t going to screw up that day and lose everything. It is life on a razor’s edge and few can understand it. Fewer still have the nerve and stomach for it.

Another old trader adage in the film is that “making it is fun, keeping it is the game”. Good traders know how to get out of their losers. Traders that I know can tell you about their winners. But, they will say that the best trades they made are the ones that lost them the least amount of money. Kind of like when you see a train wreck coming and you narrowly avoid it. Your sense of relief and blood pressure swing is about the same.

Traders are the smartest and shrewdest people I know. They cut to the chase. Not a lot of bullshit. They are able to size up a situation pretty quickly and make a decision. If I were in a life or death situation, I’d pick a floor trader as a partner. They know how to survive. Pressure is trading your rent check or mortgage payment. They may not be able to articulate the niceties of Bayesian probability theory, but they can certainly give you a reason why when one thing happens how many you need to have on-and how much money you will make doing it. Pit traders while in the pit were generally honest too. It wasn’t just the exchange rules that made it that way. Peer pressure from others in the pit, and the fact that you weren’t going to see any order flow played the biggest role in it. While you were in the pit, your word was your bond. It was as good as gold. Screw over your fellow trader and you were mud.

Floor trading is going the way of the dinosaur. Computerized algorithmic trading has replaced the old floor trader. Nothing will change that. But, locals saw that coming, or should have. Open Outcry survives in the options pits on the futures exchange floors, but that’s about it. I would encourage you to visit the visitors gallery at the Chicago Board of Trade, or any other US exchange while you can. It won’t be there for very much longer and the only sound you will hear there someday will be the sound of your own breath.

Traders won’t be fossilized like dinosaurs. Some will adapt and keep trading. If there is anything that 2008 proved, is that computers are not infallible. Traders that adapted were able to make money. Once the transition is done, the adapted trader might even be able to make far more than they ever were able to make before. There will be a lot more volume, and a lot more things to trade.

One thing is for sure. If you thought a circus had a lot of characters, you never have been on a trading floor. Each exchange had its own colorful characters with incredibly funny stories and antics. There is not enough room on the internet to catalogue them all. If you press a floor trader, you can hear all kinds of stories about debauchery, drugs and alcohol. But press them a little harder, and you will hear stories about some of the most generous people on earth too. I have seen guys write checks to charity that would make you blink, and all you had to do was ask. People without high school diplomas matching wits with MBA’s from the top schools in the country. Each trader an island. Competing with each other, but really competing with the market. It was and still is a helluva way to try and make a living.